What is appropriation debt?

In the law of debtor and creditor, appropriation of payments is the application of a particular payment for the purpose of paying a particular debt. In default of appropriation by either debtor or creditor, the law implies an appropriation of the earlier payments to the earlier debts.

Which of the following actions must be taken if a municipality wishes to raise its debt limit?

If a municipality wishes to raise its debt limit, the voters must approve via a public referendum. In effect, the voters are approving an increase in their taxes when they approve such a measure.

What are municipal appropriations?

Appropriation: An authorization granted by a legislative body to make expenditures and to incur obligations for specific purposes. An appropriation is usually limited in amount and the time when it can be expended. Any amount that is appropriated may be encumbered.

Who owns municipal debt?

Most state and local bonds are held by households, followed by mutual funds (which also represent household investors) (figure 3). Banks and life insurance companies used to be more prominent municipal bond holders until the Tax Reform Act of 1986 and subsequent litigation limited the advantages of doing so.

Which security does not earn interest?

Short-term fixed-income securities include Treasury bills. The T-bill matures within one year from issuance and doesn’t pay interest. Instead, investors can buy the security at a lower price than its face value, or a discount. When the bill matures, investors are paid the face value amount.

What is a variable demand note?

A variable-rate demand note (VRDN) is a long-term municipal bond which is offered to investors through money market funds. The notes allow a municipal government to borrow money for long periods of time while paying short-term interest rates to investors.

What is a municipal general fund?

A municipal, or local government, budget provides the City with a transparent spending plan that represents the City Council’s priorities and reflects available revenue. The General Fund budget represents all of the “discretionary funds” that the City collects.

What is a municipal operating budget?

The Operating Budget is the complete budget used to finance all the day-to-day operations and obligations of the City. The budget includes general government administration and operations, debt service, capital expenditures, and transfer payments for a particular fiscal year.

Who holds muni bonds?

Who buys municipal bonds? About 72 percent of bonds are owned by individuals directly or through mutual funds and the like. About 25 percent of bonds are owned by businesses, primarily property and casualty and life insurance companies, but also banks.

Are municipal bonds high risk?

While default risk is low, muni bonds are subject to interest rate risk, or the risk that rising rates will lead to falling prices. This is even more true for investors in bond funds and exchange-traded funds (ETFs) that invest in munis. Investors will see their principal value decline even if defaults remain low.

What happens when a municipality defaults on a bond?

The municipality pledges its tax revenues unconditionally to pay the interest and principal on the debt as it matures. If the debt is in the form of a bond, the bond owners have a legal claim on all the general income of the jurisdiction if a default occurs. The limitations on general obligation indebtedness are provided for in chapter 39.36 RCW.

What happens to general obligation debt in a default?

If the debt is in the form of a bond, the bond owners have a legal claim on all the general income of the jurisdiction if a default occurs. The limitations on general obligation indebtedness are provided for in chapter 39.36 RCW.

What are the requirements for unlimited tax general obligation bonds?

Unlimited tax general obligation (UTGO) bonds (also called voted debt) must be approved by 60% of the voters, with a voter turnout equal to at least 40% of those who voted in the most recent general election.

How is the amount of debt in Washington State Limited?

The amount of debt a government may incur is limited by the Washington State Constitution, individual state statutes, and whether the debt is being repaid with tax or nontax revenue sources. Federal law establishes rules about the tax status of government securities and the process for issuing and disclosing debt obligations.